Articles Category

Or a nightmare waiting to happen!

Many Builders are considering doing their first spec house (spec house = they build it and hope to sell it during or after construction).

So why do builders choose to do spec houses? There are two primary reasons;

  1. because they have a lack of continuity for their workforce, and/or
  2. they see the opportunity to marry that with the prospect to profit from a similar amount of effort required to build a house for someone else. 

Can Anything Be Done?

Obviously making more profit from the same effort sounds attractive but this comes with risks. One of those risks is perception..

A buyer’s perception can be tricky to manage. Any prospective property buyer looking to buy direct from a builder believes that they will get a soon to be completed home at a cheaper price (no sales agents involved) with a bit more say on the choices compared to the group housing companies. Occasionally the buyer has a preconceived dislike for the larger companies either from a real experience or some anecdotal story that leads them towards a smaller builder. In one sense a part of the perception problem is already solved. As they are buying a house being built they already have determined the location is good. But the risk of perception getting in the way of the sale still exists.

What gets in the way of the sale?

One of the major difficulties is negotiating with confidence. Prospective buyers will frequently test a builder’s resolve or have a benchmark price in mind. Unless the builder has mastered the art of mind reading what starts as a friendly and seemingly straight forward process degrades into multiple requests for adjustments and client side obscurity as to what the end should be. Let’s face it, the builder wants to stick to what he was building (variations can be much more costly than what can be charged for them) and the buyer seems to want endless variations.

  1. Ask for help, and we can certainly assist
  2. Ask for mediation or negotiating services and you will gain the knowledge of their position in the process

What Should You Learn?

  1. Should the builder negotiate
  2. If the builder negotiates, how low to go before it hurts
  3. Should the builder hold firm on the price and wait for a better buyer

The solutions lie in these three areas:

  1. Salesmanship – can the builder talk the talk and close a deal without burning excessive hours better spent elsewhere?
  2. Pricing with detail (using square meter and other rates just doesn’t work) – really understanding the true cost of construction and the real profit in the job
  3. Market Intelligence – knowing exactly the state of play in the market between supply and demand 

Summary

For a builder to build successfully build and sell spec houses, he needs to be far more than a jolly good builder.